5% Closing Cost - Good? Bad? Ugly?

cdigsFebruary 14, 2007

I'm hoping someone with more insight than myself can shed some light on a quote from a mortgage broker.

I am trying to get a lot-construction-perm single close loan.

The lot purchase will run $199,000. The construction costs I'm estimating at $280,000 (based on interviews with GCs) for a total of $480,000 + probably $20,000 as a contingency.

Now I've come across a mortgage broker who's quoting $24,000 (or 5% of lot+construction) closing costs (and as of yet, I do not have a breakdown of what is in that cost) so this may be impossible to answer.

He says $50,000 down and he can roll the closing costs into the loan and the rate, during construction AND for the final mortgage will be 6.25%.

So how does this deal sound? Are there any good mortgage brokers or construction lenders that folks have had good experiences with?

Any information would be much appreciated.

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davidandkasie

check out creditboards.com they have many brokers there that can answer your question. 5% closing sounds a little steep to me.

i would also check out another broker.

    Bookmark   February 14, 2007 at 2:25PM
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cdigs

Thanks for the pointer :)

    Bookmark   February 14, 2007 at 3:46PM
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zone_8grandma

5% sounds steep to me as well. We didn't use a mortgage broker. We got a list of banks from our builder (we wanted a bank that had good communication with the builder) and I started calling them. I found 3 that had good interest rates and selected the one that I felt was most responsive to us.
Our interest rate is less than 5.5%, the bank rolled the construction loan into a regular mortgage at no extra cost when the house was completed. The closing costs were less than 2% (actually .0148) of the loan amount. This was a year ago, so interest rates will be a little higher, but I think you can do better than 5% closing costs. I'd keep looking around.

    Bookmark   February 14, 2007 at 3:52PM
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cdigs

zone_8grandma, what bank did you use?

Again, thanks for the reply.

    Bookmark   February 14, 2007 at 7:47PM
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msm859

ummmm besides the high closing costs your housing costs seems really low. what part of the country are you in? generally the appropriate house costs a multiple of the appropriate lot. (unless maybe the land is extremely expensive) 280k in california wouldn't build you very much. for a 200k lot I would be expecting you to be spending 400+ for the house.

    Bookmark   February 14, 2007 at 8:26PM
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zone_8grandma

cdigs:
We used First Federal, Port angeles, WA (we're in WA state). The lot was $55,000 and the house was $265.000. Settlement costs were $3894.

there is a big advantage in using a bank that has good communication with your builder. sometimes the builder wants an advance for something that is 99% complete.... There's a judgement call as to whether to sign for it or not. When there's an issue, it helps a lot to be dealing with people at the bank who know the builder.....

    Bookmark   February 14, 2007 at 9:33PM
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cdigs

I'm building in NJ.

Yes, the cost of the lot is incredibly disproprotional to the cost of the house. It will only be 1998 heated SQFT (not including the 1007 SQFT basement and 420 SQFT garage), which is a modest sized house, but the reality is that individual plots of land in NJ in areas close to transportation to NYC is incredibly scarce. All the other land has been gobbled by developers already and the McMansions run no lower than the $700K threshold.

This particular lot happens to be about 5 minutes away from major transporation centers into NYC via bus and maybe 10-15 minutes away from train stations to NYC. The bus ride, on a good day, is probably only 45 minutes.

Compared to other lots in the area I've seen in the past 6 months, this one is a "steal" :(

    Bookmark   February 15, 2007 at 10:53AM
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